Implementing Extended FP&A (xP&A) for Your Organization

Virtually every firm implements some measure of financial planning and analysis – it’s virtually impossible to run any sort of profitable enterprise without having accurate and up-to-date information on internal financial trends and projections, after all. But in recent years, most industry professionals have moved towards extended FP&A, otherwise known as integrated FP&A, company-wide planning, or collaborative planning, as a more exhaustive model for tackling financial futures. 

There’s a strong consensus amongst industry experts that xP&A leads to significant financial planning improvements when compared to traditional FP&A practices, based off the core principle of running financial simulations integrated across the entire organization. At its most basic level, this is what xP&A is all about – financial planning that’s not limited to the projections of a single financial department, but rather actively runs its analysis with the goals and objectives of the entire company as an integral part of overall projections. 

Gartner’s 2020 Strategic Roadmap estimates that by 2024, 70% of new FP&A projects will be xP&A. Virtually every study on the subject indicates that a close integration of FP&A and Business Intelligence (BI) results in tighter company control, reduced workflow time, and better performance. So why all the hype around xP&A, and, more importantly, how can you see these same promising results for your financial planning team? Before we talk about how to transition from FP&A to xP&A, let’s talk about what xP&A actually is. 

Fundamentals of xP&A 

If traditional FP&A functions off the principles of evaluating assets and determining hard financial models for the company’s future, xP&A works by creating on-demand models to manage multiple scenarios that integrate planning at every organizational level from the executive to the strategic. Traditional FP&A models fail to account for strategic initiatives from leadership or interior departments, and often totally overlook the human resources aspect of organizational planning, leading to skewed models that overemphasize developing technologies and hard capital. 

As a result, FP&A models are typically sufficient when everything ‘goes to plan’ for the quarter in which they operate, but lack of accounting for so many important variables means that unprecedented or unpredictable scenarios can dramatically throw off the model and, in the worst-case scenario, toss entire businesses into disarray. As has been evidenced by the COVID-19 pandemic and the dramatic change to international business models that came with it, preparing for multiple financial scenarios and business models as necessary is absolutely critical for any organization looking to survive and thrive in today’s financial realities. 

Transforming from FP&A to xP&A 

The transition from traditional FP&A to xP&A is a process that requires the cooperation of your whole organization and the willingness to make deep shifts in the manner that your financial planning team interacts with the rest of the company. Chiefly, this means establishing a Center of Excellence (CoE) for your FP&A team, or a central strategic center that directly interacts with top executives from every department to stay closely in tune with the strategic and operational goals of the company as a whole. It’s absolutely critical for a successfully xP&A team to remain deeply in tune with not just these executive objectives, but also company culture and the physical workplace dynamics around them to better determine multi-situational models for the organization’s future. 

As a result, this transition can be a careful balancing act in creating an xP&A center that’s legitimately in tune with the needs and beliefs of the wider organization – otherwise you’re right back where you started with inaccurate, skewed models that fail to account for human variables. Here’s some best practice tips that might help you on your journey to upgrade your FP&A experience. 

Effective Implementation Strategies for xP&A 

The single most critical element in building a functional xP&A team is involving the entire organization in its creation. The core element of xP&A is its direct vertical integration with the entire enterprise, so every department needs to be onboard and in the loop with its creation to best facilitate xP&A’s multiple dynamic financial models. 

On the topic of modeling, the second most important thing is ensuring you have both the technology and the specialists to use it in creating the highly adaptive and flexible data models necessary or company-wide planning. I’d highly recommend making the move to Power BI if you haven’t already, as it’s a huge help in setting up functional data plans and making sure your team has actionable information that they can base their wider strategies on. 

Finally, once you’ve got an integrated department and enabling business intelligence technologies in place, you’ll need to restructure your FP&A into the centralized format (as in a Center of Excellence) so that they’re able to both maintain integration with the wider organization and create their own independent models based on the larger features of the enterprise and its dynamics outside the xP&A team.  

Of course, implementing xP&A is easier said than done, and it’s not a bad idea to look for professional contractor help to make sure that your strategy is effective, and, of course, actually beneficial to the company. Even though successful xP&A implementation has led to very promising benefits for the organizations that’ve moved towards it, you should keep in mind that an equally high number of inexperienced FP&A projects fail outright, especially in regards to complex, high-level analytical programs like xP&A. 

With the world moving faster and faster every day, organizations that fail to respond to changing trends get left behind. And in the rapid environment of the digital era, speed and adaptiveness is everything. If your financial planning team can’t adjust for rapidly changing scenarios, then the models they produce aren’t much more than a best-guess situation. With 70% of FP&A teams expected to transition to xP&A by 2024, I, for one, wouldn’t want to be part of the 30% getting left behind as the industry moves forward.